The oil market's tumultuous start to 2026 reveals a delicate dance between geopolitical tensions and energy supply. But will the market find its balance, or is a crisis looming?
The IEA's Oil Market Report for January 2026 highlights a volatile beginning to the year, with Brent crude oil prices initially spiking $6/bbl to $66/bbl, only to retreat to $64/bbl amidst geopolitical unrest. The cause? Rising tensions surrounding Iran and Venezuela, two nations already grappling with oil export challenges.
Iranian oil loadings witnessed a sharp decline, dropping by 350 kb/d to 1.6 mb/d in the last two months of 2025, with excess oil accumulating at sea. Simultaneously, Venezuela's crude exports plummeted to 300 kb/d in early January, hindered by the US blockade of sanctioned tankers. But here's where it gets controversial: while these countries struggle, others thrive.
Russian domestic refinery operations and exports made a remarkable recovery in December, with crude output soaring by 550 kb/d month-on-month, despite attacks on energy infrastructure. However, discounted prices for Russian oil and products resulted in lower export revenues, estimated at $11 billion, half of pre-invasion levels. And this is the part most people miss: the oil market's resilience in the face of such geopolitical turmoil.
Global oil stocks surged by 470 mb in 2025, or 1.3 mb/d on average, primarily due to increased oil on water, higher Chinese crude stocks, and US gas liquids inventories. This trend continued in November, with a 75 mb jump in global oil stocks, or 2.5 mb/d, as more oil moved onshore. Early data suggests further stock builds in December, particularly in China, counterbalancing sharp drops in crude oil inventories in Middle Eastern producer countries.
The global oil surplus is primarily attributed to non-OPEC+ producers, who contributed nearly 60% of the 3 mb/d total supply growth since 2025. Saudi Arabia has been pivotal in OPEC+'s supply increase, while the US, Canada, Brazil, Guyana, and Argentina have led non-OPEC+ growth. If disruptions are minimal and OPEC+ maintains its production strategy, global oil supplies could surge by an additional 2.5 mb/d in 2026, outpacing the projected demand increase of 930 kb/d.
So, what does this mean for the market? With a substantial surplus in storage and at sea, the oil market seems well-cushioned. But is this stability sustainable? Will geopolitical tensions escalate, or will the market find equilibrium? Share your thoughts in the comments below!
